American Axle: Game's not over

This article originally appeared in the Auto.com section of The Detroit Free Press on August 15, 2001 at http://www.auto.com/industry/axle15_20010815.htm.

By Jamie Butters / The Detroit Free Press

The State of Michigan put the first piece of an $18.5-million incentive package on the table, but American Axle isn't biting yet.

The Michigan Economic Development Corp. awarded $4.4 million in single-business tax credits Tuesday to build a $44.5-million, seven-story headquarters in Detroit off I-75 at Holbrook Avenue, state officials said.

The remaining $14.1 million in incentives awaits administrative approval to deem the site a Renaissance Zone. That will be wrapped up within a month, said Doug Rothwell, chief executive officer of MEDC.

"We're obviously very confident that this is going to close the deal," he said.

Not so fast, said American Axle spokeswoman Carrie Gray. The company has not closed the door on other states, she said.

The founder, chairman and chief executive officer of American Axle & Manufacturing Holdings Inc., Richard E. Dauch, late last month threatened to find a new home for the state's 21st-largest business, possibly Ohio and New York where it has operations and investors.

At least 200 employees would be expected to work at the headquarters within five years and perhaps another 200 within 10 years. About half would likely be newly hired, Rothwell said.

If the company builds the 176,000-square-foot building at the northeastern corner of I-75 and Holbrook, it could house more than executive and administrative staff, Gray said. The company owns a technical center in Rochester Hills that employs about 200.

June 22, the city applied for the proposed site adjacent to the current headquarters to be considered a Renaissance Zone, and the Michigan Strategic Fund approved it July 19. The final hurdle is the fairly routine Administrative Board approval, which is likely within a month. The incentives are spread over 12 years.

The site had been used as a manufacturing site for General Motors Corp. for decades and will cost about $6 million to prepare for headquarters construction, Rothwell said.

Renaissance Zones are virtually tax-free areas designated by the state, unlike Enterprise Zones, which are administered by the federal government.

But some opposition has been heard. Such incentive programs are fundamentally unfair, said Joseph Lehman, a spokesman with the Mackinac Center, a free-market think tank.

"Put yourself in the shoes of a competitor: Some of their taxes are going to subsidize American Axle," he said.

It can be hard to tell whether the state and the city are getting a good deal, said Lana Pollack, president of the Michigan Environmental Council, a nonprofit coalition of 55 organizations.

But taxpayer dollars are clearly better spent on brown fields than on what she sees as the inevitable subsidization of suburban sprawl.

"It makes a lot more sense to invest money in redeveloping our cities than it does to draw the economic life away from our cities," she said.

The American Axle incentives would not be the biggest in metro Detroit.

Construction of the Compuware Corp. headquarters and Ford Motor Co.'s redevelopment of the Rouge facility in Dearborn each garnered the state's maximum brown field tax credit amount of $30 million. Ford's total package could reach $220 million for the $2 billion effort.

American Axle was formed in 1994 when Dauch, who ran worldwide manufacturing for Chrysler Corp. under Lee Iacocca, bought several axle plants from GM and invested in new technology and equipment.

American Axle employs 7,000 in Michigan and generates about $3 billion a year in revenue, mostly from parts for GM pickups and sport-utility vehicles.